Canada Reviews Boeing Contracts After Bombardier Jet Challenge

Greg QuinnMay 18, 2017 6:08 pm ET

(Bloomberg) -- Canada’s government is threatening to “review” its defense contracts with Boeing Co., which include a planned purchase of Super Hornet fighter jets, in response to the U.S. company’s trade challenge against rival Bombardier Inc.

Boeing is asking the International Trade Commission to find that it has suffered injury to its business at the hands of Bombardier, claiming the Canadian company’s C Series aircraft is being sold at unfairly low prices. Boeing wants the tribunal to recommend the Commerce Department impose duties on Bombardier.

Late Thursday, Foreign Minister Chrystia Freeland said “Boeing’s petition is clearly aimed at blocking Bombardier’s new aircraft” from the U.S. market, and hinted at retribution. While Freeland didn’t elaborate, Canada said in November it would enter talks with the Chicago-based company to buy 18 Super Hornets.

“Canada is reviewing current military procurement that relates to Boeing,”Freeland said in a statement. “Our government will defend the interests of Bombardier, the Canadian aerospace industry, and our aerospace workers.”

The minister’s intervention is another sign of growing trade tensions between Canada and the U.S. on the day President Donald Trump gave notice to Congress he will renegotiate the North American Free Trade Agreement.

“Boeing admits it does not compete with exports of the CS100 aircraft, so it is all the more difficult to see these allegations as legitimate, particularly with the dominance of the Boeing 737 family in the U.S. market,” according to Freeland’s statement.

A Boeing spokesman called Canada a valued customer. “Boeing consistently places substantial amounts of commercial and defense work in Canada and has a supply chain across all regions,” Scott Day said by email Thursday evening, noting ”our partnership dates back to 1919.”

Bombardier has dismissed the allegations. “Boeing doesn’t even make a product that competes with the aircraft Bombardier offered in the sales campaigns that Boeing complains about,” lawyer Peter Lichtenbaum told the trade commission.

The Canadian government earlier this year pledged C$372.5 million ($274 million) to Bombardier to finance two jet programs including the C Series. Quebec’s provincial government invested $1 billion in the jetliner last year.